Originally published at RealMoney on September 19, 2007.

Tony Crescenzi says the latest PPI report should be tossed because the benign headline reading will almost certainly be reversed in the months ahead owing to the surge in energy costs that has occurred of late. I say not so fast! If prices are rising, that means some companies out there are likely to see better profits. Before tossing out the report, I’m betting we can figure out who a few of them will be.

The Bureau of Labor Statistics, which prepares the PPI report, provides detailed information on an industry basis. The problem is figuring out how to find it on their web site. Starting at the PPI home page, I scroll down to the headline that says “Get Detailed PPI Statistics” then click on Industry Data. You can then pick out which industries you want to see (I pick ‘em all) and click “Retrieve Data.” Then I select “More Formatting Options” and click on the boxes for 12-month percent change, all years, and include graphs. Once I hit “retrieve data” again I have what I’m looking for - graphs that make it easy to tell which industries are gaining or losing their pricing power.

First up is the fruit and vegetable canning industry. At 5.3% year/year inflation, pricing is clearly better than normal. It is down from a recent peak but still looks to be generally in a rising trend.

Possible plays on this industry include can makers such as Ball Corp. (BLL), Crown Holdings CCK - Annual Report), or Silgan (SLGN - Annual Report). Or you can go to the food processors such as Campbell Soup (CPB), Del Monte (DLM - Annual Report), Hain Celestial (HAIN), or HJ Heinz (HNZ).

Looking better still are industrial valves, up 9.3% year/year against tough comparisons.

Some of the industrial valve makers include Flowserve (FLS), Crane (CR) and Curtiss Wright (CW - Annual Report).

But enough with boring “old” industries. How about tech? It is seldom that tech prices actually increase, but sometimes they decline at a slower than usual pace, which can provide a similar opportunity. That may be the case right now with computer storage devices.

Last month’s 2.9% decline from last year was the smallest price drop on record for this industry, and the ongoing consolidation may help the trend continue. Plenty of ways to play this one, including Brocade (BRCD), EMC (EMC - Annual Report), Iomega (IOM), Hutchinson (HTCH), Quantum (QTM), Sandisk (SNDK - Annual Report), Seagate (STX - Annual Report), and Western Digital (WDC).

By contrast, semiconductors are experiencing the worst pricing on record.

That could be the signal for a contrarian play (I happen to think the worst will soon be over for semiconductors) or possibly just an excuse to avoid the group for a while.

The PPI clued me in to the opportunity in railroads a year before Buffett bought in. I hestitate to bet against him, but it looks like the industry’s price increases have ground to a halt.

If you have the guts, I’d count this as bad news for Burlington Northern (BNI), CSX Corp. (CSX), Norfolk Southern (NSC), and Union Pacific (UNP).

Finally, Wired Telecommunications saw pricing decline for years after the 1996 Telecom Act, but recent consolidation is allowing them to raise prices again.

Winners here would be CenturyTel (CTL), AT&T (T - Annual Report), Verizon (VZ - Annual Report) and Embarq (EQ).

By my count, that is 26 potential stock tips, all courtesy of the U.S. government. I’ll take that over tossing the report any day.

Disclosure: Long Semiconductor HOLDRs (SMH).

CACI International (CAI) announced earnings:

For the third quarter of Fiscal Year 2007 (FY07) the Company reported record revenue of $473.1 million, up 8.7 percent over third quarter of Fiscal Year 2006 (FY06) revenue of $435.4 million, driven by acquisitions made in FY06. Operating income for the quarter was $34.5 million versus operating income of $36.8 million in the year earlier quarter, a decrease of 6.4 percent. The Company’s operating margin in the quarter was 7.3 percent compared with 8.5 percent in the year earlier quarter. This decrease was driven primarily by higher other direct costs as a percent of revenue during the period. The effective tax rate for the quarter was 37.6 percent versus 34.2 percent in the third quarter of FY06. Net income for the third quarter was $18.4 million, or $0.59 per diluted share, down 13.6 percent from $21.4 million, or $0.69 per diluted share, for the third quarter of FY06. Operating cash flow for the quarter was $50.3 million, compared with $46.8 million in the year earlier quarter.

Analysts were expecting the company to earn $0.59 on $471 million in revenue. What they were not expecting was that President Bush’s war spending bill veto would torpedo the company’s guidance:

The Company issued its revised guidance for its fourth fiscal quarter of FY07 and all of FY07. This guidance excludes the revenue or earnings from future acquisitions that may be completed prior to the end of FY07.

Revenue $465 - $495 million in Q4, $1,883 - $1,913 million for the full year
Diluted earnings per share $0.60 - $0.68 in Q4, $2.44 - $2.52 for the full year

Commenting on the updated guidance, Paul Cofoni, CACI’s President of U.S. Operations, said, “Our guidance for the fourth fiscal quarter of FY07 reflects many of the factors of the challenging market environment. With
the continuing uncertainty of the passing of the FY07 supplemental, actions are being taken within the Department of Defense and, specifically, the U.S. Army to slow spending. At this time, we cannot precisely estimate the specific impact these actions will have on our operations. We will update our guidance if there is any material change between now and the end of the June quarter.”

“While we anticipate that a supplemental for FY07 will ultimately be signed into law, we expect uncertainty surrounding the level of DoD funding will continue into our next fiscal year as the FY08 defense appropriations
and supplemental are considered by Congress. As a result, we have less visibility into our next fiscal year than we normally would have at this point in the year.

Analysts were expecting $481 million in fourth quarter revenue and $0.65 in earnings per share. The lack of “visibility into [the] next fiscal year” may prove even more troubling. For the first nine months of the current year, the company has done a good job managing working capital, resulting in a nice improvement to free cash flow.